HOW TO REDUCE CHILD POVERTY NOW
Our nation can reduce child poverty at least 57 percent and lift 5.5 million children out of poverty now by improving and investing in policies that work.
Child poverty is not inevitable, necessary or morally defensible. Sentencing more than 12.8 million children to poverty is a choice—an immoral choice—in a nation with the world’s largest economy. We have more than enough resources and knowledge to conquer our child poverty crisis, but we have chosen to use our ever-growing affluence to enrich the wealthiest few at the expense of millions of poor children. We have chosen to invest in billionaires before babies and put corporate greed before child need.
We can choose another path. We can give every child the chance to grow up free from poverty. We already know what works. Since 1967, child poverty has been cut almost in half with the help of benefits like nutrition assistance, housing vouchers and refundable tax credits. Safety net programs and tax credits lifted nearly 7 million children out of poverty in 2017 alone.
We know what works. We can and must do more.
Millions of children still get left behind, however, because our nation fails to invest in and expand these proven policies and programs. Some of these children remain poor after receiving public benefits because safety net programs are inadequately funded. Some are locked out of receiving benefits entirely due to eligibility and benefit restrictions. Many working families struggle to make ends meet because wages are too low and housing and child care costs are out of control. We can—and must—fix these problems to help more children escape poverty now.
Building on our 2015 study, CDF sought to determine how much closer our nation could get to ending child poverty by simply improving and investing more in existing policies and programs that work. CDF identified nine policy improvements that could be enacted immediately to help:
- Increase employment and make work pay for families with children; and
- Ensure children’s basic needs are met when families fall on hard times.
CDF designed these policy improvements to not only lift children above the poverty line but also help them stay out of poverty. In addition to helping poor families, these policies help families living just a few thousand dollars above the poverty line that still struggle to meet their children’s needs and face greater risk of falling back into poverty. Many of these policy improvements encourage work and gradually phase out benefits for families above the poverty line to target assistance to those most in need.
After identifying a set of policy improvements to help more of today’s poor and near-poor children, CDF contracted with the Urban Institute, a leading nonpartisan research organization, to estimate the child poverty impacts and costs of these improvements. Using TRIM3, a well-respected tool for modeling potential impacts of changes to U.S. safety net programs and policies, the Urban Institute found these combined policy improvements would reduce child poverty at least 57.1 percent and lift 5.5 million children from poverty in a single year at a cost of $52.3 billion.
This chapter outlines these proposed policy improvements, which together represent a package for an immediate and substantial down payment on ending child poverty for all children. Full details on the combined impacts of these policy improvements by income level, age, race, ethnicity and geography are presented in Chapter 3. Technical details on how these policies were modeled by the Urban Institute can be found in the box on page 31 or Appendix 2.
Together, the following policy improvements would cut child poverty at least 57 percent and help 5.5 million children escape poverty by increasing employment, making work pay and meeting children’s basic needs. This down payment is a critical next step towards ending child poverty.
Increasing Employment and Making Work Pay for Adults with Children
The best anti-poverty strategy is ensuring parents and caregivers who are able to work have jobs that pay enough to support a family. CDF identified six policy improvements to increase family income through the labor market and work-connected tax credits and help caregivers cover child care costs.
1. Provide Publicly-Funded Transitional Jobs for Families with Children
Why This Policy — For most of the past 15 years, the number of unemployed job seekers has exceeded the number of job vacancies by more than two million, regardless of the state of the economy. Too many workers are being excluded from the labor force. Publicly-funded transitional jobs could provide work for the unemployed and underemployed, enabling them to earn income and build skills. Transitional jobs—deployed effectively during the 2008-2009 Great Recession—benefitted long-term unemployed individuals most and increased employment and income after participation ended. These programs alleviate short-term hardship for families by providing immediate work-based income support and help disconnected youth find work and gain other employment.
Proposed Improvements — To increase employment for families with children, CDF proposes establishing a transitional jobs program to provide minimum-wage jobs to unemployed or underemployed individuals ages 16-64 in families with children for 30 weeks at a time, with a possibility of renewal after four weeks of searching for unsubsidized employment.
2. Raise the Minimum Wage to $15 an Hour
Why This Policy — Millions of working families with children struggle to make ends meet because wages are too low. More than two-thirds (70.1 percent) of poor children in related families live with an adult who works and more than a third (34.0 percent) live with an adult who works full-time year-round. A parent with two children working full-time at the current federal minimum wage of $7.25 an hour takes home an annual income $4,669 below the poverty level. The current federal minimum wage is worth about 29 percent less in inflation-adjusted terms than at its peak in 1968. It would be more than $20.00 today had it grown at the same rate as worker productivity. However, the federal minimum wage has stagnated at $7.25 for a decade, and it must be raised to help families make ends meet and support their children’s development. Recent research links a higher minimum wage to lower rates of infant mortality and low birth weight.
Proposed Improvements — To ensure working families earn enough to support their children, we propose increasing the federal hourly minimum wage from $7.25 to $15.00 for workers covered by the Fair Labor Standards Act (FLSA) and raising the wage to 70 percent of that ($10.50) for tipped workers by 2024.
“I have faith. But I also have politics.”
In 2014, 8-year-old Alexander lived with two older siblings and his mom in a single-room apartment. Alexander’s family valued time together, but this time came at a price. So savvy Alexander started saving money. “I want to buy one hour of your time,” Alexander told big brother Julio, who was then 24 and working up to 16-hours a day at two full-time jobs. “How much for one hour to play with me?”
Julio wept at Alexander’s question. And he prayed. And then he became active in a local Fight for $15 campaign to raise the minimum wage in Emeryville, CA. “God, he believes in justice,” he said. “I have faith. But I also have politics.” There were marches, strikes and a big victory: city council members voted in 2015 to increase the minimum wage. The subsequent bump in Julio’s pay changed his life—and Alexander’s. Julio could afford to work less and spend more time with his little brother. Now, he often picks up Alexander from school.
Sociologist and writer Matthew Desmond shared Julio’s story and the stories of other low-wage workers in a New York Times Magazine article. A common theme in the workers’ experiences? Higher wages translated to improved financial security, improved health and improved lives. And research confirmed that children receive some of the biggest benefits of an increased minimum wage—declines in rates of low birth-weight babies, infant mortality, teen births and teen alcohol consumption have all been linked to higher minimum wages.
3. Increase the Earned Income Tax Credit for Poor Working Families with Children
Why This Policy — The Earned Income Tax Credit (EITC) is one of our nation’s most effective tools for reducing child poverty in working families, keeping about 3 million children out of poverty in 2016. The EITC is available to working adults beginning with the first dollar earned and its value increases with earnings up to a maximum, providing an incentive to work and to work more hours. Decades of research confirm it encourages work and boosts earnings. EITC expansion was the main reason employment among single mothers increased in the 1990s—even more than the booming economy or welfare reform. The EITC improves the lives of children, their families and their communities. It is linked to children’s improved school performance as well as higher college attendance rates. It also stimulates local economies, as families use the credit for necessities like groceries and medical expenses. Research shows a $1.50–$2.00 return to the economy for every EITC dollar a worker earns.
Proposed Improvements — To better serve families with lower incomes through the EITC, CDF proposes increasing the EITC’s value and raising the phase-in rates. A single parent with one child would see her maximum credit increase by 31 percent. We recognize expanding the EITC for childless workers or noncustodial parents is also important for children they may have or be related to in other households. However, it was not possible to model the impact of the proposed EITC expansion on these children because TRIM3 cannot link childless adults or noncustodial parents in one household to children in other households.
4. Make the Child Tax Credit Fully Refundable with Extra Benefits for Young Children
Why This Policy — The Child Tax Credit (CTC)—as modified by the 2017 Tax Cuts and Jobs Act—provides families up to $2,000 for each child under 17 to help offset child rearing costs. However, the CTC’s anti-poverty effects are limited because the poorest families cannot receive the full credit. Under current law, families must earn more than $2,500 a year to be eligible. Once families meet that threshold, the credit’s value starts out small and rises as family income increases. A single parent with two children must earn almost $30,000 to qualify for the full credit. The CTC is also only refundable up to $1,400, meaning lower-income working families owing no federal income tax can only receive a $1,400 credit—not the full $2,000. These limitations deny approximately 27 million children under 17 the credit’s full benefits or any benefit at all.
Proposed Improvements —To broaden eligibility and boost the value of the CTC for the poorest working families, CDF proposes making the CTC fully refundable and beginning refundability with the first dollar of earnings. The earnings eligibility threshold would be lowered from $2,500 to $1 and the refundable portion of the credit would rise from $1,400 to $2,000 per child. Recognizing the special vulnerability of the youngest children, the credit’s value would be phased in at a rate of 50 cents on the dollar rather than 15 cents for children under 5. To reduce costs and better target the CTC to needy families, eligibility would be restricted for higher income families. The income level at which the CTC begins to phase out would revert to pre-2017 levels, from $200,000 for individuals and $400,000 for married couples to $75,000 for individuals and $110,000 for married couples.
5. Expand Child Care Subsidies with No Co-Pays
Why This Policy — To work, parents need access to affordable, quality child care. Due to rising costs, however, child care has grown increasingly out of reach for many low-income families. Center-based infant care cost more than in-state college tuition in 28 states and the District of Columbia in 2017. While the federal government and states provide child care subsidies to some families with children under 13 through the Child Care and Development Block Grant (CCDBG) and related government funding streams, only about 15 percent of all federally-eligible children benefit due to limited funding.
Proposed Improvements — To help more parents get the child care assistance they need to work, CDF proposes expanding federal child care subsidies to all needy families with incomes below 150 percent of poverty. These families would also be exempted from co-pays.
6. Expand the Child and Dependent Care Tax Credit and Make It Fully Refundable
Why This Policy — The Child and Dependent Care Tax Credit (CDCTC) helps parents work by reimbursing families for a portion of their child or dependent care expenses. In 2017, 6.3 million taxpayers received a total of $3.4 billion through the CDCTC. However, because the CDCTC is a nonrefundable credit available only to those who earn enough to face federal income tax liability, many low-income families do not benefit. Even when help is provided, the CDCTC only reimburses a maximum of 35 percent of child or dependent care costs. Many low-income families need additional support to reduce their out of pocket child care costs.
Proposed Improvements — To help cover child care costs for working families, CDF proposes making the CDCTC fully refundable to enable all families to benefit and increasing the maximum portion of reimbursable costs from 35 to 50 percent for lower-income families.
Ensuring Children’s Basic Needs Are Met When Families Fall on Hard Times
Ending child poverty also requires meeting basic child needs when the economy shrinks, disaster hits or parents lose their jobs. Children’s chances of reaching productive adulthood are strongly influenced by their experiences growing up. If they go hungry, suffer homelessness or experience prolonged stress from economic hardships, their opportunities in life will be diminished. CDF identified three policy improvements to ensure children’s basic needs for housing, food and child support are met when families fall on hard times.
7. Increase Supplemental Nutrition Assistance Program Benefits
Why This Policy — The Supplemental Nutrition Assistance Program (SNAP) helped combat hunger among more than 18 million children in FY2017—a quarter of all children in our nation—and kept 1.5 million children out of poverty in 2017. However, SNAP benefits averaged only $1.40 a person per meal—far from enough for nutritious food. In 2017 half of all households receiving SNAP were still food-insecure, clear evidence that current SNAP benefits are insufficient to meet families’ food needs. Food insecurity hurts children’s cognitive development and has been linked to poor nutrition, poor health and behavioral problems.
Proposed Improvements — To increase SNAP’s anti-poverty and anti-hunger impact for households with children, CDF proposes calculating SNAP benefits based on the U.S. Department of Agriculture’s Low-Cost Food Plan to increase benefits about 31 percent over current Thrifty Food Plan benefits. The Low-Cost Food Plan assumes use of different foods, higher quality food and higher overall costs.
8. Expand Housing Vouchers for Low-Income Renters
Why This Policy — Housing is the single largest expense for most families and rents keep rising around the country. In 2017, a full-time, year-round minimum wage worker could not afford the monthly Fair Market Rent for a two-bedroom rental unit in any state or the District of Columbia and have enough money for food, utilities and other necessities. The number of families with worst-case housing needs—low-income families with high rent burdens or severely inadequate housing who do not receive housing assistance—increased from 7.7 million in 2013 to 8.3 million in 2015, including 2.9 million families with children. Federal rental assistance—including public housing and vouchers for private rentals—helps more than 5 million of our neediest households afford a place to live. Due to funding limitations, however, fewer than 1 in 4 needy families with children benefit.
Proposed Improvements — To help more poor and near-poor families with children meet their housing needs, CDF proposes expanding the housing voucher program for families below 150 percent of the official poverty guidelines who need but do not receive housing assistance and for whom the fair market rent exceeds 50 percent of their income.
Professionals on the Frontlines of Child Poverty: Educators
Wayne Harris is a calm and steady source of encouragement for the young men who seek refuge at Safe in My Brother’s Arms (S.I.M.B.A.), a program for homeless students in New York City. Harris founded S.I.M.B.A, as well as its companion program All Sisters Evolving Together (A.S.E.T) to respond to the unique needs of homeless students navigating the harsh reality of living in shelters on top of living in poverty. “A lot of young people are inspired by some of the pain and of some the trauma that they experience but they are not fortunate enough to have the support to overcome those obstacles,” Harris said. That’s where Harris and his team step in with academic resources, mentoring and extracurricular activities.
More than 1.4 million students in our nation’s public school system were homeless during the 2016-2017 school year, the most recent available data from the National Center for Education Statistics. In New York, more than 1 in 10 students enrolled in city and state schools were homeless during the 2017-2018 school year. Schools and academic support programs like S.I.M.B.A. that welcome homeless students each day must be prepared not just to educate, but to triage. Chronic tardiness might be the result of a long commute to school from a shelter far from campus grounds. A star student’s sinking grades could be a sign of depression or inability to sleep.
Educators can provide a supportive learning environment and compassion, but it’s not up to them to build affordable housing or fund housing vouchers. Our nation’s leaders must boost housing assistance so all families can afford a stable home.
9. Help Child Support Benefit More Families Directly in TANF and SNAP
Why This Policy — Child support made up over half (58 percent) of all income among poor custodial families who received full payments in 2015, and it helped 455,000 children escape poverty in 2017. Many families assisted under the Temporary Assistance for Needy Families program (TANF) receive no direct child support, however. Under TANF, states collect child support payments from non-custodial parents but keep most of the money to reimburse themselves for the cost of providing TANF benefits to custodial families. Although states have the option to “pass through” child support payments to the custodial parent and child so the family may keep both its TANF and some child support, only about half of all states did so in 2017 (see Appendix 1). States that pass through can also opt to disregard the child support payment when determining eligibility for TANF benefits to ensure families truly benefit financially from the additional support. The SNAP program does not include a disregard for child support income.
Proposed Improvements — To ensure families receive child support payments to which they are entitled, CDF proposes requiring states to disburse all child support collected on behalf of a family receiving TANF and disregard child support income when determining TANF eligibility and benefit amounts. In addition, up to $100 of monthly child support income would be disregarded for each child when determining SNAP eligibility and benefit amounts.
These policy improvements would make a substantial and immediate down payment on ending child poverty for all children.
While several of these policy improvements would have large impacts on their own—most notably expanding housing vouchers, increasing SNAP benefits and increasing the EITC—maximizing the impact of these policy improvements requires they be enacted together (see Table 2.1). Picking and choosing from this menu of policy improvements won’t cut it.
According to the Urban Institute, these combined policy improvements would reduce child poverty at least 57.1 percent, lift 5.5 million children out of poverty and help an additional 3.6 million poor children in a single year. It is important to note the estimates presented in this chapter and throughout the report do not account for additional anticipated impacts of the improved Child Tax Credit (CTC) due to difficulties in modeling (see Appendix 2 for additional details). Nonetheless, because our CTC proposal is better targeted to poor families and reduces credits for well-off families, we project our CTC improvements would only enhance the anti-poverty effects of this package and save money relative to existing law. Enacting our proposed CTC improvements with the other policy improvements would likely extend the impact of this package beyond a 57.1 percent child poverty reduction.
Other Combined Policy Packages
EITC, housing vouchers and SNAP increases together would reduce child poverty 45 percent.
A package of policies that incentivizes work through the improved EITC and meets children’s basic housing and nutrition needs would have dramatic positive benefits without triggering economic arguments about raising the minimum wage. The Urban Institute found these three policies would reduce child poverty 44.7 percent at a cost of $51.5 billion.
EITC, CDCTC, child care subsidies, a minimum wage increase and transitional jobs would decrease child poverty 43 percent.
A package that focuses solely on helping people work and making work pay more would reduce child poverty 31.8 percent at a cost of $14.4 billion. The anti-poverty effects of this package are increased by pairing an increase in the minimum wage with an improved EITC, two policies that amplify and complement each other. Increasing the minimum wage would boost the value of the EITC for low-income workers, and increasing the value of the EITC for lower-wage workers would increase incentives to work. The anti-poverty impacts of subsidized jobs programs would also be amplified by minimum wage and EITC changes. Increases to the CDCTC and increased child care subsidies would also further incentivize work by effectively increasing wages.
No child in our nation should be poor. Finishing the job will require us to go further, but we must get started now.
In addition to immediately enacting the policy improvements outlined in this chapter, we must continue to engage in broader, sustained efforts to permanently break the cycle of intergenerational poverty and improve the odds for all children.
We must ensure children already eligible for these policies and programs are enrolled and benefit. This means expanding outreach efforts and pushing back against program cuts. We must reverse policies that deny credits and other benefits to children and parents in immigrant families and stop policies like the proposed expanded public charge rule, which is already creating a chilling effect and discouraging children from getting the benefits they are entitled to.
We must also continue efforts to ensure children access to affordable, comprehensive, child-specific health coverage and care, high-quality early child development and learning opportunities, high performing elementary and secondary schools and colleges, families and neighborhoods free from violence and targeted economic opportunities for young adults. Children do not come in pieces. Sound policy must address the needs of the whole child and bolster family and community efforts.
We cannot stop until no child in America lives in poverty, but we must get started now. Let’s enact the policy improvements outlined in this report to help millions of children escape poverty immediately. Together, they will broadly benefit today’s children and tomorrow’s future.